{"id":2700,"date":"2023-10-18T12:12:54","date_gmt":"2023-10-18T12:12:54","guid":{"rendered":"https:\/\/infundpros.com\/business\/what-the-israel-hamas-war-means-for-defense-stocks\/"},"modified":"2023-10-18T12:12:54","modified_gmt":"2023-10-18T12:12:54","slug":"what-the-israel-hamas-war-means-for-defense-stocks","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=2700","title":{"rendered":"What the Israel-Hamas war means for defense stocks"},"content":{"rendered":"
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\n A version of this story first appeared in CNN Business\u2019 Before the Bell newsletter. Not a subscriber? You can sign up\u00a0<\/em>right here<\/em>. You can listen to an audio version of the newsletter by clicking the same link.<\/em>\n<\/p>\n<\/p>\n

\n When war breaks out, defense companies tend to make money. That means aerospace and defense stocks tend to rise during geopolitical unrest.\n <\/p>\n

\n In the immediate aftermath of the Israel-Hamas War, shares of military contractors spiked as both institutional and retail investors bought in, according to VandaTrack research.\n <\/p>\n

\n The iShares U.S. Aerospace & Defense ETF, which tracks companies including Raytheon, Lockheed Martin, Boeing, General Dynamics and Northrop Grumman, has surged by about 7% since the initial attacks on Israel earlier this month.\n <\/p>\n

\n What\u2019s happening:<\/strong> On a recent earnings call, Lockheed Martin executives highlighted the Israel and Ukraine conflicts as potential drivers for increased revenue in the coming years.\n <\/p>\n

\n \u201cIn the longer term there are some things that are changing significantly. One is the global threat environment and the geopolitical situations getting more concerning and challenging,\u201d said Jim Taiclet, chairman, president and CEO of Lockheed Martin Corporation on Tuesday. \u201cThat\u2019s refocusing the US and certainly our allies around the world on national defense in an increasing manner.\u201d\n <\/p>\n

\n Some Wall Street titans are also concerned about the possibility that the conflict could widen beyond Israel and Hamas. JPMorgan Chase CEO Jamie Dimon told investors on Friday that \u201cnow may be the most dangerous time the world has seen in decades.\u201d The Israel-Hamas war and the war in Ukraine, he said, \u201cmay have far-reaching impacts on energy and food markets, global trade and geopolitical relationships.\u201d\n <\/p>\n

\n Sam Stovall, chief investment strategist at CFRA, also pointed out that there have been several instances of conflict in the Middle East \u201cthat triggered or exacerbated US recessions and bear markets, such as the Yom Kippur War in 1973 and Iraq\u2019s invasion of Kuwait in 1990.\u201d\n <\/p>\n

\n Strong gains, loosely held: <\/strong>Despite the recent growth in share prices, defense stocks have faced a challenging year. What\u2019s making things especially difficult for defense contractors is that President Joe Biden\u2019s proposed budget, which includes a 4% increase in defense spending to $814 billion, remains in limbo, since Congress must act by November 17 to pass an appropriations bill or another continuing resolution to prevent a government shutdown. So far this year, the S&P 500 aerospace and defense index has lost about 8.5%, even with the recent gains.\n <\/p>\n

\n And even the latest <\/strong>gains could be short lived. Defense stocks typically rise after military conflicts but soon lose those gains.\n <\/p>\n

\n Following Russia\u2019s invasion of Ukraine, the iShares defense ETF surged by 5%, with Lockheed Martin and Northrop Grumman\u2019s shares jumping about 20%. But within six months, these stocks reverted, losing most of their gains.\n <\/p>\n

\n \u201cIf the war remains confined between Israel and Palestinians, it\u2019s likely that the markets will forget about it after a few days,\u201d said Raffi Boyadjian, an analyst at XM. A significant increase to the US defense budget could drive a sustained rally, he said, but that\u2019s unlikely due to Congressional challenges and the limited scope of the Israel-Hamas conflict.\n <\/p>\n

\n Meanwhile, investors seem unfazed. The 10-year Treasury note\u2019s <\/strong>yield neared a 16-year high on Tuesday. Typically, rates drop during extended conflicts as traders opt for safer assets. Steady crude futures suggest investors aren\u2019t anticipating the conflict to spread to oil-rich nations.\n <\/p>\n

\n Lollapalooza will never be the same.\n <\/p>\n

\n Goldman Sachs chief executive (and noted party DJ) David Solomon will no longer perform at high-profile events, picking Wall Street over South Beach, a representative from the second-largest investment bank confirmed to CNN.\n <\/p>\n

\n \u201cDavid decided to stop publicly DJing more than a year ago because of the outside attention to it,\u201d said Goldman spokesman Tony Fratto.\n <\/p>\n

\n Solomon, who performed under the alias DJ D-Sol, began spinning tracks at festivals and in night clubs a few years ago. \u201c[I] kind of stumbled into it as a hobby, and now I just do it for fun,\u201d Solomon, 61, said on a Goldman Sachs podcast in 2017.\n <\/p>\n

\n Solomon\u2019s unorthodox hobby likely caused some head scratching from board members who wondered why he couldn\u2019t just take up golf, but it\u2019s not the main reason the Goldman chief has found himself in hot water lately.\n <\/p>\n

\n The bank executive, who is celebrating five years at the top, is reportedly being accused by former and current coworkers of poor leadership, and his ability to effectively run the company is also reportedly being questioned by former chairman and CEO Lloyd Blankfein.\n <\/p>\n

\n But Solomon ultimately answers to shareholders, the bank\u2019s board of directors and the bottom line. And while shares of Goldman Sachs (GS) may be down by more than 8.4% this year, they\u2019re still up by about 40% since he took over in 2018.\n <\/p>\n

\n Goldman Sachs announced third-quarter results on Tuesday morning, reporting earnings of $5.47 per share, which beat the $5.31 expected by analysts. Revenue clocked in at $11.82 billion versus the $11.19 billion expected, according to Refinitiv data.\n <\/p>\n

\n Still, profit fell by 33% from a year earlier.\n <\/p>\n

\n After Elon Musk hinted last month that X could start charging all users, the company (formerly known as Twitter) announced a test of such a system.\n <\/p>\n

\n X said in a post<\/a> on Tuesday that it is testing a new program called \u201cNot a Bot<\/a>\u201d in which new users in New Zealand and the Philippines will be required to sign up for a $1 annual subscription to post and interact with other posts.\n <\/p>\n

\n The test will apply only to new web accounts, and the fee will be waived if users sign up for X\u2019s $3.99 per month premium subscription service, reports my colleague Clare Duffy.\n <\/p>\n

\n New users in the testing region who opt out of premium and the annual subscription will only be able to read posts, watch videos and follow accounts \u2014 but not interact on the platform. Existing users will not be affected as part of the test.\n <\/p>\n

\n The company said in the post that the program is meant to \u201cbolster our already successful efforts to reduce spam, manipulation of our platform and bot activity, while balancing platform accessibility with the small fee amount,\u201d adding that the fee is not meant to be a profit driver.\n <\/p>\n<\/p><\/div>\n